If you start filing your taxes with what seems like a free service, you might find yourself halfway through when you need to report one investment. Suddenly, you’re looking at a $40 upgrade fee. Then you want to file your state return — that’s another $15. By checkout, your “free” filing cost $55.
This happens to millions of Americans every tax season. What starts as free filing turns into a maze of fees and upsells that can cost more than advertised alternatives.
The Hidden Costs
The average American now spends $290 and 13 hours filing their taxes, according to the National Taxpayers Union Foundation. Much of that cost comes from software that isn’t actually free.
Take FreeTaxUSA, often promoted as a free alternative. Federal filing is free, but state returns cost $14.99. TaxAct charges $39.99 per state. H&R Block’s paid tiers start at around $79 for federal filing, with state returns adding another $64.
Why Fees Exist
“Tax software pricing isn’t as simple as ‘free vs paid,’” explains a recent analysis from The College Investor. What starts as a low-advertised price can increase quickly once you move beyond a basic return.
Companies use tiered pricing models where costs jump based on the forms you need. Have investment income? That bumps you to a higher tier. Own rental property? Another upgrade. The “free” versions are deliberately limited to simple W-2 returns with standard deductions.
Dustin Stamper, managing director at Grant Thornton’s tax office, puts it bluntly: “It’s not easy or intuitive to figure out what it all means to your bottom line. There’s no substitute for actually running the numbers.”
The Real Cost of Upsells
Even small fees compound. If you need to report cryptocurrency trades, own a home, or have multiple income sources, you’ll likely pay between $80 – $200 total for software that advertises as “free” or “starting at $39.”
That’s real money. Americans collectively spend $148 billion annually on out-of-pocket tax filing expenses, according to federal estimates.
What to Watch For
Consumer experts recommend asking these questions before choosing tax software:
- Does “free” include both federal and state filing?
- What exactly triggers an upgrade to paid tiers?
- Are there fees for paying with your refund?
- Can you see the total costs before starting?
Lack of transparency in pricing is a red flag, warns TaxDome’s research team. If a service won’t discuss fees upfront, that signals potential hidden charges.
A Different Approach
TurboTax is taking direct aim at this confusion. Through February 28, more than 100 million people can file both federal and state returns for $0 using their mobile app with no catches, no upgrades required.
The offer is straightforward. You qualify if you:
- Didn’t file with TurboTax last year
- Start and file in the TurboTax mobile app
- File by February 28
- Use the DIY option (excludes expert services)
That’s it. No income limits. No restrictions on homeowners or investors. Federal free, state free.
TurboTax filed more than twice as many totally free returns as FreeTaxUSA last year*, despite FreeTaxUSA’s reputation as the “free” alternative.
Early Refund Bonus
There’s one more advantage worth knowing. If you direct your refund to a Credit Karma Money account, TurboTax can get it there up to five days early. For anyone counting on that refund money, the timing matters.
The free offer ends February 28. After that, standard pricing applies.
The bottom line: Tax filing doesn’t have to be expensive. But it often is, thanks to misleading “free” offers that aren’t actually free. This year, at least, there’s a genuinely free alternative that covers what most people actually need.
